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Capital Gains Due to Changes in the Market Discount Rate and Workers’ Welfare
Department of Economics, Amherst College (Emeritus), Amherst, USA
- 1 Department of Economics, Amherst College (Emeritus), Amherst, USA
Modern Economy·Volume 14 (2023)·Pages 1131–1141·Published 1 September 2023·DOI10.4236/me.2023.149058
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Abstract
The paper analyzes how capital gains due to a reduction in the market discount rate affect life-cycle consumption choice. The analysis is done in a simple general equilibrium model with cohorts of workers and retirees all with constant relative risk aversion preferences. Simulation results show capital gains due to a fall in market discount rates make workers worse off with the exception of those with less than 7 years to retirement. The analysis has policy implication for the taxation of capital gains.
KeywordsE200: Definition of IncomeE210: Consumption Savings and WealthG120: Asset Pricing
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